Implementation of a Hub to capture individual profit-maximizing behavior in the gas market

The gas market situation in Europe has changed considerably with the liberalization of the gas industry as the introduction of competition has increased the interaction among shippers. The 3rd EU Gas Directive (2009/73/EC) establishes the constitution of national or supra-national virtual hubs to enlarge the market. This that has led to the emergence of balancing zones and trading hubs in Europe that are introducing flexibility in the markets and reducing transaction costs. The objective of this paper is to represent the strategic behavior of shippers operating in the natural gas market, while representing the market operation in detail and to analyze the impact of introducing a hub in the downstream natural gas market.